Tobacco Documents Online

PRESENTATION OF F. SEWARD ANDERSON, JR. MAYOR OF THE CITY OF DANVILLE, VIRGINIA BEFORE THE WAYS AND MEANS COMMITTEE UNITED STATES CONGRESS NOVEMBER 18, 1993 MR. CHAIRMAN, LADIES AND GENTLEMEN OF THE COMMITTEE, I AM SEWARD ANDERSON, MAYOR OF THE CITY OF DANVILLE, VIRGINIA -- A SMALL CITY IN A LARGELY RURAL AREA OF SOUTHSIDE VIRGINIA. I AM DEEPLY GRATIFIED FOR THE OPPORTUNITY TO SPEAK WITH YOU TODAY. WE, IN DANVILLE, ARE VERY PROUDLY CELEBRATING OUR 200TH YEAR AS A CITY. BEFORE WE WERE A CITY WERE A WEIGHING AND INSPECTION STATION FOR TOBACCO. THE AUCTION SYSTEM USED THROUGHOUT THE TOBACCO INDUSTRY WAS DEVELOPED IN DANVILLE. THE NATION'S SECOND LARGEST TOBACCO PROCESSING COMPANY, DIBRELL BROTHERS, INC., IS LOCATED IN DANVILLE AND THE CITY'S NUMBER ONE RADIO STATION'S CALL LETTERS STAND FOR WORLD'S BEST TOBACCO MARKET. AS OF THIS MORNING, 49.7 MILLION POUNDS OF TOBACCO HAD BEEN SOLD ON DANVILLE WAREHOUSE FLOORS FOR THIS SEASON -- FOR $85.3 MILLION DOLLARS. DANVILLE SELLS FULLY ONE-HALF OF ALL FLUE-CURED TOBACCO GROWN IN VIRGINIA AND IS THE SECOND LARGEST MARKET IN THE NATION. THESE ARE NOT STATISTICS MEANT TO IMPRESS YOU WITH OR ANYTHING OTHER THAN THE FACT THAT DANVILLE, VIRGINIA -- ITS 53,000 RESIDENTS AND THE 150,000 OR SO PERSONS LIVING IN THE IMMEDIATE AREA -- ARE IN VERY LARGE MEASURE, DEPENDENT ON THE TOBACCO CROP FOR THEIR LIVELIHOOD. THE FEDERAL EXCISE TAX ON CIGARETTES HAS INCREASED 200% SINCE 1982, WHILE THE CPI HAS ADVANCED ONLY 47%. THE LATEST INCREASE WENT INTO EFFECT JANUARY 1, 1993. THIS YEAR! USING FIGURES TAKEN FROM A 1992 PRICE WATERHOUSE STUDY, A 75 CENTS PER PACK INCREASE ON CIGARETTES WOULD CAUSE A 12% DROP IN CIGARETTE SALE NATIONALLY. THIS 12% DECREASE IN SALES TRANSLATES INTO NEARLY 82,000 TOBACCO SECTOR JOBS BEING LOST. BECAUSE TOBACCO PRODUCTION AND MANUFACTURE IS PRIMARILY LOCATED IN THE SOUTH, DANVILLE AND HER SISTER CITIES IN THE TOBACCO BELT CAN EXPECT AN EMPLOYMENT LOSS OF 350% GREATER THAN THE NATION AS A WHOLE. COMBINE THAT WITH A CORRESPONDING LOSS OF STATE TOBACCO TAX REVENUE, AND WHERE DOES THAT PLACE MY CONSTITUENTS? IN A VERY DEEP HOLE -- THAT'S WHERE! UNEMPLOYMENT UP SUBSTANTIALLY, SOCIAL SERVICES HARD PRESSED TO FULFILL THEIR MISSION, PROPERTY ASSESSMENTS AND TAXES DOWN, SALES TAX REVENUE DOWN, MEALS TAX REVENUE DOWN AND PERSONAL PROPERTY TAX DOWN. AND IF YOU THINK FOR ONE MINUTE THIS WILL ESCAPE THE NOTICE OF MOODY'S AND STANDARD AND POORS -- THINK AGAIN. DANVILLE'S BOND RATING WILL SURELY SUFFER AND BORROWING COST WILL INCREASE. CAPTIAL PROJECTS WILL BE POSTPONED, SCHOOLS WILL NOT BE BUILT, BRIDGES WILL GO UNREPAIRED, UTILITY EXTENSIONS AND REPAIRS WILL GO UNFUNDED. THIS IS NOT CONJECTURE. OUR RATING WAS REDUCED IN 1984 TO A WHEN THE RATING AGENCIES DETERMINED WE WERE TOO DEPENDENT ON TEXTILES, AND TEXTILES WERE CATEGORIZED AS A MATURE INDUSTRY. JUST AS FRIGHTENING, PERHAPS MORE SO, IS THE EFFECT ALL THESE REVENUE LOSSES WILL HAVE ON OUR INTERGOVERNMENTAL RELATIONSHIP: A STATE LEGISLATURE HARD PRESSED FOR REVENUE WILL NOT SHOW THE LOCALITIES MERCY. THE UNFUNDED MANDATES THAT HAVE PLAGUED US THROUGH THE EIGHTIES AND NINETIES WILL CONTINUE, AND THE POLICY OF SHIFTING THE STATE'S BURDEN TO THE LOCALITIES AND SHAFTING LOCAL GOVERNMENTS WILL ONLY ACCELERATE. WILL THE EDICTS OF THE EPA, THE STATE WATER CONTROL BOARD, THE DEPARTMENT OF WASTE MANAGEMENT SUDDENLY NO LONGER APPLY DUE TO HARDSHIPS? I THINK WE ALL KNOW THE ANSWER TO THAT ONE. AS A COUNCIL MEMBER AND AS MAYOR, I HAVE BEEN A PARTY TO NUMEROUS TAX AND RATE INCREASES. THEY HAVE TAKEN EVERY FORM ALLOWABLE BY STATE CONSTITUTION AND CITY CODE. THEY HAVE CROSSED ETHNIC, RACIAL, AND ECONOMIC LINES. THEY HAVE AFFECTED HOMEOWNERS, BUSINESS OWNERS, RENTERS, USERS, THE GOOD, THE BAD, AND THE UGLY. YOU NAME IT, WE'VE

PROBABLY TAXED IT IF WE HAD THE AUTHORITY. AND YET, NOTWITHSTANDING ALL THESE INCREASES, I HAVE LED THE VOTING IN THE LAST THREE ELECTIONS. HOW CAN THIS BE, IN SUCH A CONSERVATIVE CITY AS DANVILLE? I FEEL IT IS IN GREAT MEASURE DUE TO OUR PHILOSOPHY OF TAXATION. IT RESTS FIRMLY ON TWO TENETS: IT MUST BE ABSOLUTELY INESCAPABLE AND SECONDLY (AND MORE IMPORTANTLY) IT MUST BE FAIR. IN EVERY PUBLIC HEARING WE'VE EVER HELD REGARDING TAXATION OR PUBLIC POLICY, MY CONSTITUENTS STRESS TO A PERSON -- "PLEASE BE FAIR; RAISE ADDITIONAL REVENUE I_F-YOU MUST, JUST BE FAIR IN THE APPLICATION." FAIRNESS IS WHAT WE ASK TODAY. ONE OF THE RESPONSIBILITIES OF. GOVERNMENT IS TO PROTECT THE FEW FROM THE MANY. THE TOBACCO FARMER AND THE COMMUNITIES THAT RELY ON THEM AND THEIR PRODUCT ARE CERTAINLY FEW. AND THEY NEED YOUR HELP. AT TODAY'S TAX LEVEIS, THE AMERICAN TOBACCO FARMER IS GROWING A PRODUCT THAT PROVIDES $62,000 IN STATE AND FEDERAL EXCISE TAXES PER ACRE. AN EFFICIENT TOBACCO FARMER MAY REAP $2,000 NET PER ACRE. LADIES AND GENTLEMEN, I DO NOT SMOKE, NOR DO I CHEW, AND NEITHER DO I DIP. I DO NOT USE TOBACCO PRODUCTS. HOWEVER, THE TAX PROPOSAL WILL AFFECT ME AND EVERY NON-SMOKER IN DANVILLE MUCH WORSE THAN THE CHAIN SMOKER IN NEWARK OR THE CHEWER IN TULSA. THEY WILL SIMPLY PAY WITH MONEY. WE WILL PAY WITH LOST JOBS, LOST FARMS, LOST BUSINESSES AND LOST DREAMS. AND EACH OF YOU KNOWS THAT I SPEAK THE TRUTH. THE SO-CALLED-LUXURY TAX ON YACHTS DID LITTLE TO INCREASE TAX REVENUES, BUT DID SIGNIFICANT HARM TO THOSE EMPLOYED IN THE INDUSTRY. WHEN DETERMINING WHAT IS FAIR, I WISH YOU WOULD TAKE INTO CONSIDERATION THE FOLLOWING: THE AMERICAN MEDICAL ASSOCIATION (AMA) HAS ARGUED THAT SMOKERS OVER-USE THE GOVERNMENT'S MEDICAL PROGRAS'IS. BEAR IN MIND THAT 45% OF THOSE SERVED BY MEDICAID ARE CHILDREN, WHILE 15% ARE OVER 65. ADDITIONALLY, MORE THAN 90% OF MEDICARE BENEFICIARIES ARE OVER 65. IN THESE AGE GROUPS, ONLY 16% ARE SMOKERS. FURTHER, THE AMA SUGGESTS THAT THE GOVERNMENT SPENT $4.2 BILLION IN MEDICAID AND MEDICARE PROGRAMS ON TOBACCO RELATED ILLNESSES.1 TP:KING A SECOND SOURCE, THE CONGRESSIONAL.OFFICE OF TECHNOLOGY ASSESSMENT RECENTLY CLAIMED THAT TOTAL STATE, LOCAL, AND FEDERAL MEDICAL EXPENDITURES DUE TO SMOKING RELATED ILLNESSES WAS $8.9 BILLION. OF THIS $8.9 BILLION, THE OTA PEGGED THE FEDERAL SHARE AT $6.3 BILLION.2 THAT IS EQUAL TO 24 CENTS PER PACK SOLD IN AMERICA. COINCIDENTALLY, THE FEDERAL EXCISE TAX ON CIGARETTES STANDS AT 24 CENTS PER PACK. SO -- THE AMA PLACES THE FEDERAL TOBACCO-RELATED HEALTH CARE COST AT $4.2 BILLION ANNUALLY AND THE OTA PLACES THE FIGURE AT $6.3 BILLION. ADMITTEDLY, THESE ARE LARGE NUMBERS BUT THEY PALE IN COMPARISON TO THE $11.3 BILLION IN FEDERAL, STATE, AND LOCAL EXCISE TAXES AMERICANS ALREADY PAY. AS I MENTIONED EARLIER, I DO NOT USE TOBACCO PRODUCTS. BUT I DO ENJOY THE BENEFITS OF THE NATION'S HEALTH CARE PROVIDERS, THE INSURANCE COMPANIES THAT ASSIST IN PAYMENT AS WELL AS THE PEACE OF MIND THAT ACCOMPANIES GOOD HEALTH. IF WE ARE TO EXTEND HEALTH CARE BENEFITS TO THE 37 MILLION AMERICANS WHO ARE CURRENTLY WITHOUT HEALTH INSURANCE, ALLOW ME TO HELP. IF WE ARE TO INSURE THE HEALTH OF AMERICANS YET TO BE BORN, ALLOW ME TO HELP. I BEG OF YOU TO BROADEN THE SCOPE OF YOUR REVENUE SOURCE. IF WE AS A NATION, DO IN FACT, FEEL THE PAIN OF OUR FELLOW MAN, THEN CERTAINLY WE DO NOT WANT TO BE A PARTY TO INFLICTING FURTHER PAIN UPON THIS GREAT NATION'S TOBACCO FARMERS, AND THE CITIES SUCH AS MY DANVILLE WHOSE EXI'STENCE IS DEPENDENT UPON THEM. A BURDEN SHARED IS A BURDEN LIGHTENED. THE TOBACCO INDUSTRY AND Qo THOSE WHO USE THEIR PRODUCTS ARE AMPLY TAXED. LET ME SHARE -- LET CD MILLIONS OF OTHER AMERICANS EAGER TO IMPROVE OUR HEALTH SYSTEM SHARE. ~ LET US SEEK A BROADER BASED SOLUTION TO OUR PROBLEM. WITH APOLOGY TO W WILLIAM JENNINGS BRYANT, I IMPLORE YOU PLEASE DO NOT PRESS DOWN UPON ~ THE BROW OF MY PEOPLE THIS CROWN OF THORNY TAXES; PLEASE DO NOT CRUCIFY US UPON A CROSS OF GOLDEN LEAF.3 ~

F• { M ENDNOTES 1. Extracted from BC&T Analaysis of Price Waterhouse Study of Employment & Compensation in the U.S. Tobacco industry, 1993. 2. ibid. 3. William Jennings Bryan, Democratic National Convention, 1896.